Ok, that's really helpful.
This means that the limit of memory that php can consume isn't set high enough. What is confusing is that its exactly the same as your other server. Can we try increasing the memory limit in the php.ini file to 256M? Remember that apache probably has to be restarted after a change there. Also, there is a memory setting on the options page you probably want to change. I'm curios to see if that fixes it.
Out of curiosity, can you verify settings on the options page? Particularly interested if the images are being scanned for executables or not. Stuff like that.
Thanks!
tim